LC Opening Decreased by 23 Percent in FY23

Bangladesh's imports significantly decreased in the immediately preceding FY23 as a result of fewer letters of credit (LCs) being opened as a result of a lack of US dollars and limitations on the importation of luxury goods.

According to Bangladesh Bank data, private and state organizations opened LCs worth $69.36 billion in FY23, a 26% decrease from $94.26 billion in FY22.

The central bank began tightening measures to discourage imports in response to mounting pressure on the nation's foreign exchange reserves and volatility in the exchange market as imports were greater than exports and remittances.

To prevent the depletion of the reserves, it encouraged banks to accept up to 100% of import payments from firms in the form of advances and began checking imports totaling $3 million and above before allowing them to create LCs.

However, according to BB statistics, the nation's reserves decreased 25% year over year to $29 billion on July 26.

According to data for the fiscal year's July to May quarter, fewer LCs were opened for capital equipment.

Businesses opened $2.69 billion worth of LCs for the import of capital equipment over the 11-month period, a 55% decrease from the previous year.

To $21.17 billion, the LC opening for the import of industrial raw materials fell 30%. 

According to the BB, the percentage of drop for intermediate items was 24%.

Overall, businesses opened 18% lower LCs at $7.14 billion in July-May.